COMPANY NEWS

COMPANY NEWS; P.& G. Sees Big Savings In Price Plan

By EBEN SHAPIRO

Published: October 14, 1992

The Procter & Gamble Company said yesterday that it expected to save $175 million a year from its controversial new pricing strategy and that it would soon report record first-quarter profits.

The pricing announcement by Edwin L. Artzt, the chairman, at the company's shareholder meeting yesterday in Cincinnati, was the first time Procter had publicly detailed the benefits of its new strategy, which calls for eliminating discounts and special deals to grocers in favor of consistently lower prices.

Procter's shift, which is being tried by other manufacturers, is hotly opposed by some grocers who rely on the special deals as an important source of profits. Higher Efficiency

Mr. Artzt defended the strategy, called value pricing or everyday low-pricing, saying that it had led to far more efficient manufacturing cycles by eliminating the sudden bursts of demand created when grocers rush to stock up on special trade deals.

"By substantially reducing the variation in trade demand for these brands, as well as reducing variations in volume forecasts, plant production and raw materials supply, P.& G. stands to realize as much as $175 million a year in real cost savings," Mr. Artzt said. Last year, Procter earned $1.87 billion on sales of $29.36 billion.

The value pricing strategy, introduced last fall, is now in place for about half of Procter's products. Mr. Artz said eliminating inefficiency was a critical step in providing better values for shoppers.

"There is a basic truth that every business will have to live by in the 1990's: consumers won't pay for a company's inefficiency," he said. "We simply must drive costs out of our systems that don't add value for the consumer." Good Earnings News

Mr. Artzt said that excluding a previously announced $200 million charge for dropping the Citrus Hill orange juice line, earnings "are coming in somewhat better than expected." He said the company would announce record profits later this month for the first fiscal quarter, which ended Sept. 30.

P.& G.'s stock gained 87.5 cents a share yesterday on the strength of Mr. Artzt's projection, closing at $50.50 on the New York Stock Exchange.

Mr. Artzt sought to put aside rumors that the company planned to abandon other parts of its food and beverage business in addition to Citrus Hill. He said that food profits had doubled in the last two years and that the company had increased its market share in 9 of its 11 food and drink businesses.

Mr. Artzt also disclosed that the company had failed in its attempt to get the patent extended for olestra, a fat substitute it has been working on for more than 20 years. A bill to get the patent extended failed to be passed into law this year, despite a lobbying effort by P.& G. that included a letter-writing campaign by 12,000 of the company's employees.

Olestra has been under Food and Drug Administration review since 1987. Mr. Artzt said he believed the ingredient would be approved in 1994. The company plans to use it first in salty snacks. The four olestra patents will expire in 1994.